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ARTICLE · 04 DECEMBER 2014

California Tax Developments (3rd Quarter 2014)

Reed Smith
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On November 14, the Fresno County Superior Court determined that Swart, an Iowa-based corporation with a tangential investment in California, did not meet the statutory requirement for doing business in California.

United StatesTax
Marty Dakessian
Marty Dakessian
Brian Toman
Brian Toman
John Messenger
John Messenger
Mike Shaikh
Mike Shaikh
Shirley Wei
Shirley Wei
Erin J. Mariano
Erin J. Mariano
Jenny Choi
Jenny Choi
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Case Updates

Court finds ownership of LLC membership interest does not constitute doing business in California

On November 14, the Fresno County Superior Court determined that Swart, an Iowa-based corporation with a tangential investment in California, did not meet the statutory requirement for doing business in California.1 Swart invested $50,000, amounting to approximately 0.02% ownership, in a California LLC. Swart had no physical presence in California; it had no employees in California, and did not own real or personal property in California. Its only connection to California was its ownership interest in the LLC. In granting Swart's motion for summary judgment, the court stated that passively holding an investment does not constitute "doing business" or actively engaging in a transaction for gain or profit.

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